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To reduce the estimated multibillion-dollar costs to the federal government of renewing rental subsidy contracts while helping preserve available and affordable low-income rental housing, Congress passed the Multifamily Assisted Housing Reform and Affordability Act of 1997 (Act), which established the "mark-to market" program to restructure the contracts. The Act also created the Office of Multifamily Housing Assistance Restructuring (OMHAR) as a temporary organization within the Department of Housing and Urban Development (HUD) to administer the contract-restructuring program. With OMHAR scheduled to "sunset" (cease operations) on September 30, 2001, the Subcommittee on Housing and Transportation, Committee on Banking, Housing, and Urban Affairs, held a hearing in June 2001 to determine whether it would be more advantageous to the federal government to extend rather than end the program. Subsequently, Congress extended the sunset date to September 30, 2004, with restructuring work at HUD continuing until 2006. To ensure that OMHAR could attract and retain staff with requisite expertise in multifamily housing finance issues, the Act provided the Director of OMHAR authority to pay salaries comparable with the Federal Deposit Insurance Corporation. As a result, OMHAR salaries are generally higher than those paid for most federal positions. OMHAR is staffed in part by former HUD employees, and also by former employees of other federal agencies and the private sector. GAO agreed to (1) describe what information HUD and OMHAR officials provided regarding OMHAR staff employment at HUD following their employment at OMHAR; (2) describe how HUD determined to which OMHAR employees it would offer employment and what their pay levels would be; and (3) determine, for eligible OMHAR employees, how accepting HUD's offer would affect their pay.

Over a period of several years, HUD provided inaccurate information to OMHAR officials and staff regarding OMHAR staff members' potential employment and pay at HUD. To encourage HUD employees to apply for positions at OMHAR during start-up in 1999, HUD provided a memorandum to OMHAR managers stating that certain HUD employees who joined OMHAR would have "reemployment rights." However, HUD had neither requested nor received authority from OPM to grant reemployment rights. (HUD did have the authority to reinstate employees.) Also during 1999, HUD-prepared job announcements erroneously advertised some OMHAR positions as competitive service positions, when they were actually excepted service positions. In November 2000, HUD sent a memorandum to OMHAR managers, notifying them that it would correct erroneous OMHAR employee appointments made under incorrect announcements. However, in the same memorandum, HUD provided inaccurate information on pay levels that would apply to OMHAR employees eligible to return to HUD. Specifically, the memorandum stated that "upon the sunset of OMHAR," eligible employees would be moved into positions at HUD at their current OMHAR pay grades rather than, as is correct, their highest previously held grade in the competitive service. HUD determined to which OMHAR employees it would offer employment and what their pay would be using OPM regulations regarding reinstatement eligibility. HUD laid the groundwork for these decisions in a July 2002 memorandum to OMHAR managers noting that previous information on employment and pay that it had provided was not consistent with OPM regulations. The memorandum clarified previous inaccuracies and explained which regulations applied to staff and how these would affect employment eligibility and pay for positions at HUD. HUD also stated that its earlier "reemployment commitment" to eligible staff would be honored. Shortly after the July 2002 memorandum, OMHAR and HUD officials worked together to identify OMHAR staff to whom HUD would offer positions, based on their prior competitive status, and what their pay would be, based on their highest grade level held in the competitive service. Because OMHAR is a temporary organization and its positions are excepted rather than competitive, only staff with prior competitive status have reinstatement eligibility. HUD is using its discretionary authority to offer positions to OMHAR employees with reinstatement eligibility in an attempt to honor its "reemployment commitment." HUD is also using its authority to offer staff pay at the highest appropriate step within the last competitive grade held. Based on HUD and OMHAR's analysis, as of March 7, 2003, there were 24 staff who had been identified as eligible for reinstatement at HUD. By accepting HUD's offer of reinstatement without competition, all 24 eligible OMHAR staff would experience a reduction in pay. Based on HUD and OMHAR's analysis, as of March 7, 2003, the average decrease in pay for OMHAR staff would be 16.5 percent, or about $17,000. Specifically, 10 staff would experience a decrease of more than 20 percent, 6 would experience a decrease of 10 to 20 percent, and 8 would experience a decrease of less than 10 percent. However, to more closely match their OMHAR salary, eligible OMHAR staff may apply for higher-grade positions at any federal agency through normal competitive procedures.